April 27 (Reuters) – Shares of India’s One 97 Communications, commonly known as Paytm, recouped most losses on Monday afternoon, as analysts said the cancellation of an associate firm’s payment bank licence would have a limited impact on the fintech company.
The stock initially fell as much as 8.4% in its biggest intraday drop in more than three months, but came off lows to trade 1.5% lower by midday.
India’s central bank on Friday cancelled the licence of the associate firm, Paytm Payments Bank, saying that “the general character of the management of the bank is prejudicial to the interest of depositors as also the public interest.”
One 97 holds a 49% stake in Paytm Payments Bank, with the remaining 51% held by Vijay Shekhar Sharma, the founder of Paytm.
A payment bank licence allows an entity to take small deposits and facilitate money transfers but does not permit lending.
“We do not see any financial or operational impact on Paytm, as all commercial agreements with PPBL were terminated and the equity investment was fully impaired by March 2024,” analysts at Emkay Capital said.
“While the tone of the order is severe, Paytm is legally ring-fenced.”
The central bank had imposed business curbs on Paytm Payments Bank in January 2024, ordering the lender to stop accepting deposits due to what it said at the time was non-compliance with rules, including those on customer due diligence, fund use, and technology infrastructure.
The firm’s business has since dwindled.
“While the current business of Paytm isn’t impacted by the ban, we see risks that in the future it may become harder for Paytm to obtain any potential licenses from RBI,” analysts at BofA Global Research said.
On Saturday, the One 97 board approved the winding up of the payments bank, saying it does not expect any adverse financial impact on its business from the bank license cancellation, as the two firms operations have been de-linked over the past two years.
Paytm’s investment in the banking unit has also been written down.
(Reporting by Abhinav Parmar in Bengaluru; Editing by Rashmi Aich and Sherry Jacob-Phillips)
